A Focus on EURGBP

The EUR/GBP or the cross as it is also referred to in the FX markets has become very interesting of late. We highlighted at the beginning of this week that GBP/USD was outperforming EUR/USD and that led to an interesting subplot in EUR/GBP. For the past number of weeks EUR/GBP threatened to break out above 0.88, as we trade on a high 0.87 handle. Better than expected UK data however in Nov had seen this trend reverse, as we traded back below 0.87. Going into this week the all-important support level 0.8650 was fully in view. We took out this support level yesterday, as lower than expected inflation report was released from the Eurozone, which saw Euros sold across the board.

 

EUR/GBP – 30 day chart of EUR/GBP – we can see how improving UK data released mid Nov initially turned the higher trend in EUR/GBP – red arrow. This was compounded yesterday with the weak Eurozone inflation report, Euros were sold.

 

 

If we take a step back and look at the yearly chart of EUR/GBP we can see that we are right in the sweet spot to buy Euros and hedge EUR/GBP exposure. Over the past 10 days we have sold off nearly 2.00% in EUR/GBP and currently sit right on support at 0.8600. The 7 month range in EUR/GBP has been 0.8750 – 0.8500. The median of this range has been 0.8625. A weekly close below 0.8600 would indicate further downside momentum into next week, however when looking at the below medium term chart, we can see the value in EUR/GBP at its current levels.

Daily FX Bites 30th November 2023

Welcome to our daily morning FX Bites email. A 30 second snap shot of the key economic releases and risk events that lie ahead from across the global. We have kept it concise and clear; however containing all the information you need to ensure you are up –to-date with the latest market moving events in the world of foreign exchange – from economic data releases to the latest central bank speakers.

Economic Table 

 

Seeing Increased Volatility in the FX markets

The dominant theme in the FX markets is Dollar weakness, with the majority of the FX mayors rallying against the greenback. The perceived wisdom here is that the US Federal Reserve is done hiking interest rates and will not hike at their December meeting – US interest rates are currently at 5.50%. US yields have sold off considerable over the month of November – 10 year US interest rates are at 4.27% having traded above 5.0% in October. This loss of yield and softening US economic data has seen the Dollar sell off on average 4.5% versus G10 currencies.

This morning we have seen a slight reversal in this lower Dollar trend, particularly versus the Euro, as the Dollar has rallied on the back of weaker than expected inflation report out of France and Germany and then the Eurozone wide release. We have also seen the Euro selloff against Sterling on the back of these economic figures – with EUR/GBP breaking through very decent support at 0.8650 and trading to a low of 0.8617 so far.

Eurozone core inflation came in at 3.6% year on year versus market expectations of 3.9% – an impressive decrease from 5.7% in March of this year.

 

Day’s Highlights –

 

At ‘’ High’’ on the importance scale this afternoon we have – Chicago PMI – this is a very good activity indicator for the US economy and it will be monitored closely – 46.00 is expected by the markets.

 

 

Major levels to keep an eye on this week –

EUR/USD – All eyes on the physiological level at 1.1000 which we have broken briefly this week already – Euro has sold off this morning on the back of weaker than expected inflation figures – the first downside level of note is 1.0900- 1.0890 support.

GBP/USD – GBP/USD is outperforming the single currency and although it has sold off from the initial break of 1.27 earlier this week, it is holding onto its gains versus the Dollar and remains above decent support at 1.2600

EUR/GBP – As mentioned above – GBP/USD is outperforming EUR/USD and this has led to an interesting subplot in EUR/GBP. For the past number of weeks EUR/GBP threatened to break out above 0.88, as we trade on a high 0.87 handle. Better than expected UK data, has seen this trend reverse, as we trade back below 0.87 and on the back of weaker than expected Eurozone inflation figures this morning we have finally broken through the 0.8650 support trading to a low of 0.8617 so far.

 

Chart of the Day – EUR/USD

EUR/GBP– see below a 6 month chart of EUR/GBP – we have sold off some 1.7% in EUR/GBP over the past 10 days, trading below significant support and pivot zone at 0.8650 – see green line on chart. The low so far on this move this morning has been 0.8617, matching the lows seen towards the end of Sept –see circles on chart – a break and daily close below 0.8600 would be very significant.

Daily FX Bites 4th August 2023

Daily FX Bites 4th August 2023

* For further data please select the calendar above.

 What’s Going On?

Today’s Highlights – 

Yesterday’s decision by the Bank of England to raise interest rates by 0.25% to 5.25% was in line with market expectations. As a result, the value of the British Pound dropped against both the US Dollar and the Euro. GBP/USD reached a low of 1.2621, while EUR/GBP reached a high of 0.8655 during intra-day trading. However, after carefully analysing the BOE statement and the governor’s press conference, investors regained confidence in the Pound. GBP/USD stabilized at around 1.27, and EUR/GBP traded back down towards 0.8600. Governor Bailey’s press conference was perceived as more balanced, and as a result, the market is still pricing in another 0.25% interest rate hike in September.

It is worth noting that there has been a reassessment of the terminal interest rate in the UK, which refers to the rate at which the market believes the BOE will stop increasing interest rates. This rate now stands at 5.75%, down from its previous high of over 6.5% a few months ago.

In addition to these developments, today’s focus is on the US Jobs Report, which is traditionally the most important economic release of each month. It provides data on job creation, the unemployment rate, and average hourly earnings for the previous month. Given the current strength of the US Dollar, a strong release today is expected to further boost the currency against other G10 currencies. Both EUR/USD and GBP/USD are hovering around significant support levels at 1.09 and 1.2621 respectively, which adds even more significance to today’s release.

The consensus among analysts is that non-farm payrolls will consolidate June’s slower pace, with an expected creation of 200,000 jobs in July after the previous month’s 209,000. The unemployment rate, as measured by the household survey, surprised many by remaining unchanged at 3.6% in June. It will be interesting to see if this trend continues.

Overall, the economic landscape is constantly evolving, and it is crucial for us to stay informed and adapt our strategies accordingly.

At the top of the importance scale, we have the highly anticipated US Jobs Report this afternoon. This report, which is released on the first Friday of each month, is traditionally considered the most significant economic release. It provides crucial insights into the previous month’s job creation, unemployment rate, and average hourly earnings, making it a key indicator of the overall health of the US economy.

Given the current strength of the US Dollar, a strong release today is expected to solidify its position and propel it higher against other G10 currencies. The EUR/USD pair is currently hovering near a critical support level at 1.09, while the GBP/USD pair is testing yesterday’s lows at 1.2621. These levels hold immense significance, adding to the anticipation surrounding today’s release.

Analysts predict that non-farm payrolls will consolidate the slower pace seen in June, with an expected creation of 200,000 jobs in July following the previous month’s 209,000. The unemployment rate, as measured by the household survey, surprised many by remaining unchanged at 3.6% in June. It will be interesting to see if this trend continues. The outcome of today’s US Jobs Report will undoubtedly have a significant impact on the currency markets, and we must closely monitor any resulting trends or shifts.

Chart of the Day

The EUR/USD is currently resting on a crucial support level at 1.09, as indicated by the red line on the chart below. It would be of great significance if there is a break and weekly close below this level, especially considering the impact of a strong US Jobs Report.

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Daily FX Bites 21st July 2023

Welcome to our daily morning FX Bites email. A 30 second snap shot of the key economic releases and risk events that lie ahead from across the global. We have kept it concise and clear; however containing all the information you need to ensure you are up –to-date with the latest market moving events in the world of foreign exchange – from economic data releases to the latest central bank speakers.

economic calendar

What’s Going On?

Today’s Highlights – The Dollar continues its recovery this week lead by USD/JPY and GBP/USD. A weaker Inflation Report out of the UK earlier in the week was the catalyst for Sterling to sell off versus the Dollar and GBP/USD remains below the all-important 1.2950/1.30 level. This Dollar strength has fed into EUR/USD as well – trading off its highs seen last week above 1.1250 and currently trading down towards the 1.11 level.

We have just had the following comments from the Bank of Japan this morning –

-BOJ IS SAID TO SEE LITTLE NEED TO ACT ON YIELD CONTROL FOR NOW

-BOJ IS SAID STILL NOT CONFIDENT ABOUT HITTING PRICE GOAL STABLY

This takes any chance of a shift in monetary policy at next week’s Bank of Japan meeting off the table and has sent USD/JPY nearly 1% higher.  This should add to further Dollar strength in the G10 space over the course of today’s session.

At ‘’ High’’ on the importance scale we had – Retail Sales out of the UK this morning at 7.00am. We had a better than expected print for retail sales across the board. That’s now 5/6 prints this year surprising to the upside. We initially saw Sterling strength, however the larger Dollar strength theme has subsequently taken over and the Pound has sold off versus the Dollar.

 

Chart of the Day – Initial Sterling strength on the back of stronger Retail Sales out of the UK this morning, however the larger Dollar theme has subsequently taken off.

GBPUSD Chart

 

Treasury First– Mid Week Macro Report 20 October 2021

Treasury First– Mid Week Macro Report 20 October 2021

To say the market is in a transitional period is a slight understatement. Global Central Banks are actively acting against the rise in inflation as interest rise or are set to rise. We are in the midst of a Global energy crisis as the northern hemisphere enters the winter months. Supply chain bottlenecks are filtering through into every aspect of the global economy. Covid-19, despite the rollout of a successful vaccination campaign, continues to weigh heavily on our global health systems. All these cross winds make clear directional plays within the financial markets very tricky at present. They do however create volatility, which in turn creates opportunity, with many investors believing these next few months will be the start of a wider, more drawn-out trend in the financial markets. Something that has been difficult to come by in 2021 so far. So these are indeed exciting times for investors and traders. For us the key driver over the next few months and what will set the broader trend in all asset classes is the US Fixed Income markets. Yields are back rallying following their pause during the summer months as   the broader markets are focussing in on the growing risk of inflation rising across the globe. The rise in energy and commodity prices in particular has been joined by increases in consumer goods prices, particularly food stuffs. Shortages are plaguing many retailers and earnings are expected to highlight supply chain issues and bottlenecks along with production difficulties and labour shortages. In saying that, 80% of the US corporates that have released their 3rd Q earnings have beaten the market’s expectations. The central banks, in particular the Bank of England, Norges Bank and the Central Bank of New Zealand, are beginning to worry that inflations is growing out of hand, coupled with a worker shortage across key economic sectors and in light of this have or are about to raise interest rates. Economic data will be closely watched in the days and weeks ahead and the markets are also factoring in a taper in asset purchases programs by the US Fed. As such markets are in a transition period with external and internal market dynamics at play and ultimately plenty of opportunities.

AUDUSD

The AUDUSD FX pair is trading at 0.7497 after breaking above the 0.7475 level as resistance. Price tested resistance at the 0.7500 and rejected lower. The pair is trending higher after its break out around the 50 and 100 SMA but is potentially overstretched as it approaches the 200 SMA at 0.7530 as indicated by the stochastic. A confirmed breakout above this level and the 200 SMA, opens the way to resistance at the 0.7618 area followed by 0.7700 and 0.7777. Alternatively a move down under 0.7437 opens the way to support at 0.7350 and the 100SMA. This area of support is followed by further supports at 0.7300 and 0.7150.

Wall St 30 Index

The Wall St 30 Index has consolidated over recent months and is now testing the resistance area of the last higher high cluster around 35500.00. The stochastic is flashing an overbought warning and the 33500.00 area of support is corresponding to the neckline for a head and shoulders/double top pattern. A selloff below that area would trigger the pattern with a target around 31500.00. The pattern would become invalid with a move back above 35650.00 and a push over 35800.00. If the market breaks above the resistance area at 36000.00, the way opens potential for a rally toward 36300.00. Alternatively, a move back below 35000.00 signals a test on the support at 50 and 100 SMAs around 34850.00 The 34110.00 area then becomes supportive followed by the 34000.00 round number level. Below this level the 33500.00 area would be used as support followed by 33000.00.

EURUSD

The EURUSD is showing how the price has sold off to test support at 1.1525 to start the month. With price now trading at 1.1640, resistance can be seen at 1.1670 and 50 SMA at 1.1705, while support may be found at 1.1600. The 1.1800 area is expected to act as resistance in the short term, followed by 1.1900 as it relates to the lower high and the 200 SMA. A break above this level would find resistance at the 1.2000 area. A continued move higher finds more resistance around the 1.2265. A breakout from there opens the way to 1.2347. Alternatively a move back down under 1.1600 would find supports at 1.1525 and 1.1500. A loss of this level extends the control of sellers and opens the way to a test on 1.1400 area followed by 1.1300 and 1.1260.

Mid Week Macro Report 15 September 2021

Treasury First – Mid Week Macro Report 15 September 2021

Growing worries surrounding the cash strapped Chinese Evergrande property group is rippling across markets with the groups May 2023 bonds halted for trade after falling more than 20% overnight.

https://www.reuters.com/business/fitch-says-possible-china-evergrande-default-may-have-broader-effects-2021-09-15/

Chinese authorities stated overnight that the group would not be in a position to pay interest due on 20th September. The group has been scrambling to raise the funds it needs to pay suppliers and lenders. Risks are rising of a default linked to the bank such as smaller Chinese financial institutions and the wider Chinese property market. The groups share price fell to a six year low yesterday amid wild swings in price. The group has over $305B in liabilities with no material progress made in its attempt to sell off assets, as fears intensify that it will be unable to repay investors. Markets are riding waves of risk at present as central banks look to taper their Covid emergency purchases programmes. Economic data is presenting mixed signals and Covid is waxing and waning in various locations. All in all the seasonal weakness in asset prices in dragging prices lower as the risk off sentiment takes hold with Quadruple witching taking place in the equity markets later this week – Quadruple witching refers to four days during the calendar year when the contracts on four different kinds of financial assets expire. The assets on which the contracts expire on that day are stock optionssingle stock futuresstock index futures and stock index options. These expiries days can bring with them added volatility in the stock markets.

The above is all in the backdrop of weaker US stocks markets over the past week. The price action in stocks was very telling yesterday, as they failed to rally on the back of a weaker CPI figure out of the US. In the past this would have been positive for stocks, as with low inflation the global Central Banks are in no rush to taper or raise interest rates and the monetary stimulus continues. Stock markets should be monitored closely over the remaining trading sessions this week, as they dictate the market’s sentiment and moves in other asset classes.

AUDUSD

The AUDUSD FX pair is trading at 0.7325 after testing the 50 SMA as support and breaking lower yesterday to 0.7300. Price tested resistance at the 0.7775 level in July creating a lower area of resistance and then sold off to the 0.7108 support zone in August. The pair is trending higher since then but us running into moving average resistance. Price is using the 0.7477 area as resistance in the short term. A confirmed breakout above this level and the 100 SMA, opens the way to resistance at the 0.7500 area followed by 0.7600. The 0.7615 area may then be resistive followed by the 0.7700 area. Alternatively a move back down under 0.7300 opens the way to support at 0.7200. This area of support is followed by further supports at 0.7130 and 0.7100.

US 500 Index

The US 500 Index created a high at 4549.00 at the start of the month and is now testing the 50 SMA and the rising trend line at 4450.00 area as the price action remains bullish. If the market breaks above the resistance area at 4500.00, the way opens back to 4550.00. Further resistance comes onto the chart at 4573.00 and 4600.00. The market is creating higher highs and higher lows using the support of the trend line.  Alternatively, a move back below 4450.00 signals a test on the support at 4430.00 The 4400.00 area then becomes supportive followed by 4354.00 and the 100 SMA. Below this level the 4245.00 area would be used as support along with 4230.00 as a significant higher low.

EURCAD

The EURCAD chart is showing how the pair has consolidated over recent weeks after reaching a lower high at 1.5200 in April and finding support at 1.4580 in May. With price now trading at 1.5000 as it consolidates after bouncing from support at 1.4600. The 1.5100 area is expected to act as resistance in the short term. A break above this level would find resistance ahead of 1.5200. A continued move higher finds more resistance around the 1.5267 and 1.5300. A breakout from there opens the way to 1.5442 and 1.5600. Alternatively a move back down under 1.4924 would find supports at 1.4824 and 1.4660 as the August low. A loss of this level extends the control of sellers and opens the way to a test on 1.4600 area.

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